Even the Bond King Can't Escape Reality

Bill Gross – who folks in finance know as the "Bond King" – isn't a fan of how his estranged son Nick turned out.

According to Gross, Nick is a "disappointment." The 31-year-old millennial is covered in tattoos. And he wants nothing to do with the Bond King...

The tattoos are a big problem for Gross. Nick even has the name "Gross" tattooed on the inside of his lip. His father calls it "revenge by tattoo." And he has no control over it.

The market, according to Gross, has been tattooed too. And he says it has ruined our shot at making money. But here's what's surprising...

Gross is dead wrong.

Today, I'll show you why...

Gross, if you don't know already, founded and managed the investment firm PIMCO. It managed the world's largest bond fund at its peak. And Gross was labeled "the nation's most important bond investor" by the New York Times.

So, "Bond King" might sound a little grandiose. But Bill Gross is the real deal.

That makes his latest investment outlook letter – where he covers the global economy's "tattoos" – incredibly compelling. And the financial media has had a field day with it.

"There is little money to be made almost anywhere in the world – COVID-19 vaccine or no," Gross writes.

That, as I'm sure you can guess, is the headline the media latched on to. But in doing so, they missed the larger point.

We live in a zero-rate world.

For a bond guy like Gross, this observation is obvious. He spends a lot of the letter talking about yields, rates, and central banks.

He knows that we're playing by a new set of rules now. And that's true. You need to make sure your investments are designed to work with this new zero-rate rule book.

As an individual investor, you need to understand the new rule book if you're going to succeed. And the most important thing to know is that returns are being concentrated into a handful of highly specific market segments.

This means it's more important than ever that you put your money to work in the right places. If you don't, you'll fall right into the pit that Gross is warning investors about.

If you're focused on bonds like Gross, then sure... there's little money to be made in the world. But if you open your mind to other opportunities, the reality is much different.

Our zero-rate world means the stock market has no competition. You might think stocks are expensive. But compared to what? Bonds that pay nothing?

The reality is that in this new world, stocks are the winner. They're the obvious place dollars will move into... because those dollars can't earn interest anywhere else.

The rules have changed. We live in a zero-rate world. We can't change it... just like Gross can't change the tattoos on his son's body.

Make sure that your investments align with this reality.

Good investing,

Vic Lederman

Further Reading

"Staying long might feel uncomfortable right now," Chris Igou says. The markets are frightening right now. But we're seeing signs that stocks have big upside potential over the coming years... Read more here: What to Make of the Market's Best Quarter in a Decade.

"The Fed has lit the coals of the next great asset boom," Steve writes. Just like it had during the 2008 financial crisis, the Fed has slashed rates down to near zero. And just like back then, it means we could see outsized gains in the days ahead... Get the full story here: Today's Surprising Echo From the Global Financial Crisis.

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Market Notes

HIGHS AND LOWS

NEW HIGHS OF NOTE LAST WEEK

Boston Beer (SAM)… beer
Dollar General (DG)… discount retail
Nike (NKE)… athletic apparel
Lennar (LEN)… homebuilder
Guardant Health (GH)… health care

NEW LOWS OF NOTE LAST WEEK

HSBC (HSBC)… untrustworthy bank
Nordstrom (JWN)… “death of retail”

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